Had the opportunity to tour Cleanspace Holdings facility after the AGM (Nov. 11) with @mushroompanda . Some of my notes from the AGM & tour:
All sales are via the distribution channel, and as a result, sales can be lumpy, depending on the re-sellers inventories (the MD stated they tell their distributors to keep inventories low, as they can supply stock as needed). When you look at the previous half year, the first 4 months generated $1.325 M per month. This then fell to $1 Million per month over Nov. to December. France sales represent 25% of all sales. The MD reported they received some big French orders over the past few days and recently won an Irish Govt tender, and they are confident sales will outperform the quiet Nov - March period they experienced last FY. It is fair enough to be skeptical, we have seen this movie before when it comes to H2 guidance (or hopes).
Some additional things I learned: The new Work product is simply a re-badged Halo PAPR. They have 3 production lines - Ex. (explosion proof PAPR), CST Ultra & Pro (main products), and Work / Halo. Their production lines take up about 70-80 m2 of warehouse space (the filter production plant and lab take up about another 130 m2). They have a massive inventory, and they will be downsizing their warehouse by what I reckon is 1000 m2 (reducing operating costs by about $200-300k pa). The existing production line can deliver $70 M in sales per annum. So there will be no need for growth capital expenditure for many years, and there will likely be inventory, currently written off, being re-used on the Work PAPR.
Interestingly, they manufacture the HEPA filters in house. The MD complained they are too good, as consumable sales are not lining up with PAPR sales - Users tend to just run the PAPR fan / battery harder to get more filter life......They are looking into ways to reduce the pain / barriers to ordering replacement filters. Possibly a centralised app / platform to monitor device run times and alert customers when filters need replacing.
US sales team - Is being completely re-built, and the prior team was geared towards health sector, and was unable to pivot to industrial. They have a new US sales director, and they decided to sack the entire US sales staff and start again under the new leadership / strategy (Notably - they hired a new West cost sales manager over the past week or so). They are aiming to have a team of 4 in the US sales team.
Their production leadership originates from Resmed, and most to the production team has been there for years. Work and team culture look OK. They have applied innovations form Resmed devices, such as using onboard pressure sensors to modulate airflow according to the users breathing pattern, thereby minimising airflow and battery usage, which in tunr enables a miniturised product.
They have found the new CEO, and an announcement will be coming out in the coming weeks.
I have in my notes they are aiming / expecting for 15% revenue growth on H1 2023 (which seems doable if they maintain current monthly runrate) - which is also the same as H2 2024. Lets check in on this number after H1 results.......I would be happy enough with this - As long as they can get US sales traction by end of FY 2025.
DISC - HELD